What are the us tax consequences of jolti results

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Question - Joltco, a domestic corporation, manufactures batteries for sale in the United States and abroad. Joltco markets its batteries in Europe through its wholly-owned foreign sales subsidiary, Jolti. Jolti was organized in Year 1, and its functional currency is the British pound (£). Jolti's tax attributes for its first two years of operations are as follows:

 

Year 1

Year 2

Taxable income

£100 million

None

Subpart F income (included in £100 million)

£40 million

None

Foreign taxes attributable to Subpart F income

£10 million

N/A

Actual dividend distributions (paid at end of year)

None

£8 million

The pound had an average value of $1.50 during Year 1, $1.65 during Year 2, and was worth $1.60 at the end of Year 1, and $1.70 at the end of Year 2.

Required - What are the U.S. tax consequences of Jolti's results from operations in Year 1 and Year 2? Assume that the dividend distribution in Year 2 was not subject to foreign withholding taxes.

Reference no: EM133118237

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